Coolidge Avenue resident wins Pulitzer for public service

Wednesday

May 2, 2007 at 12:01 AMMay 2, 2007 at 2:16 AM

Leslie Friday

The Coolidge Avenue resident, a special projects editor for the Wall Street Journal, was in his Boston office two weeks ago when he read an Associated Press release announcing this year’s Pulitzer Prize winners. Maremont and crew were on the list. The room, he said, erupted in cheers.

“We didn’t really expect this,” said Maremont, the former Boston bureau chief for Business Week. “We hoped at the beginning of the year that we might win a couple of prizes and then move on.”

And they did win others — eight, to be exact. But the Pulitzer Prize for public service outshines them all. Maremont considered it the most prestigious of the Pulitzers, and one that the Journal had never won before. He should know, since Maremont was part of another Pulitzer-winning team in 2003 for its investigation of corporate fraud.

Maremont and team were recognized for exposing business executives who reaped millions of dollars by backdating stock options. The Journal allowed three reporters – Charles Forelle, James Bandler, and Steve Stecklow – to work on the project with Maremont for 18 months. Their work culminated in the investigation of 140 companies and 70 executives were fired or quit. Ten people have been criminally charged, so far.

Executive compensation has sparked Maremont’s interest for years. He heard about a University of Iowa professor who was studying the backdating of stock options and dove into the story.

The deeper he dug, the bigger the story became.

“I think as the story got really rolling some months into it, it became apparent that it was a very, very big story,” said Maremont, 48.

The Pulitzer Prize winner explained the process in layman’s terms. A primary way to reward company executives in the 1990s was to allow them to buy stock options at a fixed price for a number of years. Should the stock price rise, say from $50 a share to $75, executives could sell their holdings for a pretty profit.

Yet that margin was not enough for some executives. Companies started cheating the system by backdating stock options according to the market’s ebb and flow.

Maremont compared the backdating to “betting on a horse race after the horses have rounded the far pole.”

The Journal editor employed the help of a Yale math major to crunch some numbers. Maremont said they did a “needle in a haystack” sifting of hundreds of thousands of companies that gave options right before their stock rose.

“There was a 1 in 300 billion chance at random,” Maremont said. “It was so highly improbable that there must have been some monkey business.”

The Journal’s first article exposed six companies with the most egregious backdating offenses. Regulators latched onto the story and started their own criminal investigations, Maremont said.

Word spread like wildfire in the corporate community. The Journal team called executives to see if they had committed the same crime.

“Essentially all or most of them lied to us,” Maremont said.

Reader response was huge, especially, Maremont said, on their coverage of the post-9/11 stock option backdating. Executives granted stock options at depressed prices when Wall Street crashed after the New York terrorist attacks. When stock options bounced back, “some people made millions of dollars after this post-9/11 panic,” Maremont said.

Since earning his Pulitzer, the Coolidge Avenue resident now splits his time between Needham — where Maremont, his wife, Emily Dreifus, and their three daughters, have lived for15 years — and the next party. He has hobnobbed with news elites in New York and London, collecting awards and colleagues’ praises.

For Maremont, digging up corporate secrets was part of why he went into journalism.

“We felt very good about cleaning up a dirty corner of corporate America,” Maremont said.